that a £150 Will can cost £55,000?
Yes it’s correct. In one case a straightforward Will actually cost the family £55,000. What happened was this.
The elderly gentleman was a widower with one daughter. He went to a local solicitor to get his Will made and the Will left everything to the daughter. Unfortunately no-one paid any attention or enquired as to the situation with the daughter. It later turned out that the daughter was a spinster with an Inheritance Tax allowance of £325,000. Her estate at that time was around £400,000 so she herself already had an IHT liability.
Her father then died and she inherited his estate. The daughter died a few years later and in effect everything that she had inherited from her father was liable to IHT on her death. That resulted in an IHT bill of £55,000.
What should have happened is this. The father would make the same Will leaving everything to his daughter and making her the sole executor. However he should have set up a Lifetime Trust and transferred his property and other assets into the Trust. With McClure that Trust would have cost £3,000 including VAT.
During his lifetime he would have been a Trustee of the Trust and effectively he would never have noticed the difference.
The huge difference is that when the father died the assets would not pass to the daughter. They would be retained in the father’s Trust for the benefit of the daughter but not become part of her estate for IHT purposes. In other words the daughter would have received the inheritance without the IHT. In that case the £55,000 IHT liability would have been properly avoided.
This is just one example of situations where, while everyone needs a Will obviously, very often a Will is not enough and clients need a Trust to reinforce the Will.
An additional bonus here would have been that if the father had gone into care, he would have got his care costs paid for him and there would have been no recovery because the purpose of transferring the assets into his Trust was to protect against the daughter’s IHT liability. As it was not done for care cost avoidance purposes it would then have worked for care costs.
In this case (as in many others) an investment of £3,000 on a Lifetime Trust would have paid off handsomely.
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